INTRO

- Although Japan was left with wastes and ruins of factories and infrastructures, Japan was able to
reconstruct its economy from a fresh start by building on its prewar economic experience and gaining
knowledge from the rest of the world
- To understand Japan’s postwar economic growth, we must consider its economic development and
history during the 1800s to early 1900s.
- The central government during the Meiji Period (Tokugawa Period) carried out a series of
modernization measures and it enabled Japan to import technologies and ideas from the Western
countries easier
- By 1900, Japan was ready to expand its empire in a larger scale, Until the defeat of World War II,
Japan has clearly become to be one of the most powerful countries both economically and militarily
and its basic factors for growth had been prepared. These remarkable achievements during the pre-
war period provided the basis and skills for the economic miracle after the destruction in 1945.
- The rapid economic growth in Japan from the beginning of the 1950s to the early 1970s did not only
resulted from special government policies and revolutionary events but were also achieved by the
cumulative effort and hard work by the people. The unique characteristic and ability of the Japanese
people to imitate and improve the skills learned, and then applying them to their own system was the
most important factor for their successes.

A) Ministry of International Trade and Industry (MITI) was instrumental in Japan's post-war
economic recovery. 
* Formalized cooperation between the Japanese government and private industry.
* Boosted the industrial security by untying the imports of technology from the imports of other
goods.
* They had distributed new technologies to companies to promote even growth within industries.
* Large amount of financial aid and assistance was given to the companies MITI thought were
important for economic growth of the country.

B) Foreign Capital Law - Granted the ministry power to negotiate the price and conditions of
technology imports
*This element of technological control allowed it to promote industries it deemed promising
*The low cost of imported technology allowed for rapid industrial growth. Productivity was greatly
improved through new equipment, management, and standardization

C) Fiscal Investment and Loan Plan (FLIP) - A massive pooling of individual and national savings

*MITI's establishment of the Japan Development Bank also provided the private sector with low-cost
capital for long-term growth.
*FILP controlled four times the savings of the world's largest commercial bank.
With this financial power, FILP was able to maintain an abnormally high number of Japanese
construction firms (more than twice the number of construction firms of any other nation with a
similar GDP).
*Inclined production that primarily focus on the production of raw material including steel, coal and
cotton - 83% of Japan's Development Bank's finances went toward strategic
industries: shipbuilding, electric power, coal and steel production.
D) Surplus Funds for Investment: Private savings, which banks and other financial institutions, in
turn, lend to expanding businesses, are extremely important for economic growth.

Bank of Japan issued loans to city banks who in turn issue loans to industrial conglomerates. Since
there was a shortage of capital in Japan at the time, industrial conglomerates borrowed beyond their
capacity to repay, often beyond their net worth, causing city banks in turn to over-borrow from the
Bank of Japan. This gave the national Bank of Japan complete control over dependent local banks.

E) U.S. Aid - Due in large part to concern about the spread of communism in Russia, China, North
Korea and Vietnam, America (and to some extent other members of the Allied Forces) provided
technological and economic experts to train their Japanese counterparts.

F) The Korean War

Massive American purchases of goods and services during the war served as a major economic boost
to the still-recovering Japanese economy.

Japan’s production increased by nearly 70 percent and as far as business firms were concerned, it
provided a greater boost than anything else to its economic recovery.

Foreign currency derived from U.S. Army and military personnel reached gigantic sums for those
times: $590 million in 1951 and over $800 million both in 1952 and in 1953. Thus, Japan obtained a
temporary dollar income that amounted to 60 to 70 percent of its exports and that is to say, Japan
was enabled to import at the rate of about $2 billion per year.

G) Eager and Plentiful Labor Force: After the war, 6 million soldiers and civilians returned from
Japan’s overseas colonies and “spheres of interest”; with such a large workforce in need of
employment, the cost of production was very low, allowing Japan to produce goods which could
effectively compete on the international market. Japan’s labour force contributed significantly to
economic growth. The transfer of numerous agricultural workers to modern industry resulted in rising
productivity and only moderate wage increases.

Conclusion
The most important factor that enabled Japan’s amazing economic growth, which was somewhat an
exception to modern economic history was the ability of the people itself to successfully combine all
the knowledge and skills gained from foreign countries, and then improving those skills to fit their
own system. The economic miracle did not occur simply from the reform policies implemented during
the occupation of the American forces, but the basic factors for growth had already been prepared
way beyond the start of WWII. The factors for the growth are unique and dependent upon each
policies and strategies developed during the course of expansion.